Thursday, October 07, 2004

Re: battle of the pump

In today's NYT column [ed - free registration required] , Thomas Friedman writes:
We need to dramatically cut our consumption of oil and bring the price back down to $20 a barrel. Nothing would do more to stimulate reform in the Arab-Muslim world. Oil regimes do not have to modernize or govern well. They just buy off their people and their mullahs. Governments without oil have to reform to create jobs. People do not change when you tell them they should - they change when they tell themselves they must.

I guess I am just a simpleton, because a multitude of "why's" run through my head when I read these type of statements. Why does Mr. Friedman think we [ed - we??? Is the USA the only country buying oil?] have the power to either bring the price down over 50% or the ability to cut the consumption of oil in some magic fashion? The world seems to have plenty of proof that governments without oil have a terrific record of not creating jobs [ed - random link to a country with no oil and no jobs]. The quote above sounds like it makes sense, but to me at least it does not. Certainly the causality is implied, but not demonstrated. It is not as if lack of natural resources makes for a better economy. For every prosperous but resource-poor Japan or South Korea, there is a prosperous and resource-rich Australia and Canada. And there is also Afghanistan, Egypt, Somalia. And there are countries using their natural resources to climb out - like Russia and Angola, or fall farther - like Nigeria or Saudi Arabia. There is no need to go into even the question of whether $20/barrel is going to change anything for anyone. After all, prices were much lower in September of 2001 - hovering around this very magical $20/barrel. [ed - as best as I could find out].

Similar criticisms could be applied to many of the other statements in the op-ed.

When did Jordan begin privatizing and deregulating its economy and upgrading its education system? In 1989 - after oil prices had slumped and the Arab oil states cut off Jordan's subsidies. In 1999, before Jordan signed its U.S. free-trade accord, its exports to America totaled $13 million. This year, Jordan will export over $1 billion worth of goods to the U.S. In the wake of King Abdullah II's reforms, Jordan's economy is growing at an annual rate of over 7 percent, the government is installing computers and broadband Internet links in every school, and it will soon require anyone who wants to study Islamic law and become a mosque preacher to first get a B.A. in something else, so mosque leaders won't just come from those who can't do anything else. "We had to go through a crisis to accept the need for reform," says Jordan's planning minister, Bassem Awadallah.

This actually sounds really interesting. But I am still not sure whether it is the price of oil that is the main driver here. After all, oil is hitting new records every other day now, but Jordan is not getting its subsidies back. Not to nitpick, but why did the exports to US did not change from 1989 to 1999 [ed - or at least changed only to the total of $13million], but then grew rapidly in the next 4 years. After all, $13 million to $1 billion is a huge shift. It could be due to reforms that took 10 years to produce the export boom. Or maybe these reforms found an able champion in the new king - conveniently crowned in 1999.

Friedman has found himself in an uncomfortable position over the last 2 years. His party - Democrats - have clearly not shown any interest in reforming the Middle East. Whatever ideas they may have had, are now co-opted by the White House and are therefore bitter to the Democratic Party. The Republicans made a lot of the moves Friedman advocated, but have not been able to really pull them off. In the end, Mr Friedman decides to lay the blame on the President and Vice-President:

We have the power right now to stimulate similar trends across the Arab world. It's the best way to fight a global war on terrorism. If only we had a president and vice president tough enough to fight this war.

It is not very clear how exactly "We have the power right now to stimulate similar trends across the Arab world." It is not clear how Kerry and Edwards would be able to right the wrongs, and "stimulate similar trends across the Arab world." It is not clear why other poor Arab and Muslim countries that are not awash in oil are nevertheless not prosperous by any means -- Yemen, Oman, Egypt, or even Pakistan.

IMO, this column just regurgitates tired slogans that attempt to pass for wisdom and insight. It is not the price of oil that keeps the "huge population of young people - too many of whom are unemployed or unemployable because their oil-rich regimes are resistant to change and their religious leaders are resisting modernity." If that were the case then low oil prices through the 1990's should have thoroughly modernized the Middle East years ago.

True - it is indeed the leaders of these countries that resists modernity, but, whatever the reasons, the crowds of Syrian, Egyptian, Saudi, and Pakistani men are not seeking reforms to take them forward. They are looking to depose regimes that are not fundamentalist and backward-looking enough. Their solution to lack of employment and income is to even the playing field in the opposite direction - to remove all sources of income. I fail to see how a gasoline tax will fix this problem, except provide farther proof to these people that USA is an enemy that first hooked the Muslims on easy oil money and then, like perfidious drug dealers Americans are, yanked that last support from under them.

I am not pro or against the tax. I am not sure what it would accomplish, and I have not studied its possible implications and their relative probability. However, I do find that a solution this one-dimensional is unlikely to generate much return beyond finding yet another way, yet another Administration is failing to live up to an op-ed writer's expectations.


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